Where general accounting breaks: handoffs, exceptions and workarounds

General accounting usually breaks at handoffs between subledgers and the ledger, and between entities that trade with each other. Rework follows from manual journals posted without support and from reconciliations that clear a balance without explaining it. Each failure leaves a visible trace in the ledger.

Chart of accounts drift

New accounts get created to solve a local problem. A project needs tracking, a manager wants a cost split, an auditor asks for a separate line. Nobody retires the old account, and nobody tells the team that maps accounts to reports.

The giveaway is a growing pile of accounts with tiny balances, or accounts whose names overlap. Another clue is a reporting mapping table that someone patches by hand every close. When preparers ask which account to use for a routine cost and get different answers, the structure has stopped guiding behaviour.

Manual journals with no trail

This is where most rework starts. A preparer keys an entry from a spreadsheet, attaches a summary, and routes it for approval. The approver signs because the amount looks reasonable. Later nobody can trace the figure back to a source document.

Watch for journals with vague descriptions such as "adjustment" or "per review". Look for entries posted and reversed in the same period, and for approvers who also prepared the entry. A high share of manual entries in accounts that should be fed by a subledger means the feed is broken and people are covering for it.

Allocations that only one person can run

Shared costs get spread using drivers held in a workbook. The workbook lives on someone's desktop. When that person is away, the allocation is late or skipped.

Signs include allocated cost centres that swing for no operational reason, and budget holders disputing their charges every month. If the driver data is refreshed by copy and paste, expect errors that surface only after reports go out.

Period end entries that do not reverse cleanly

Accruals for goods received but not invoiced, prepaid amortisation and deferred revenue all depend on estimates. The trouble comes when the accrual is booked but the reversal is forgotten, or when the invoice arrives and gets posted on top of it.

Double counting shows up as accrual accounts that never return to near zero. Revenue that was earned but not yet billed is a common blind spot. If the billing team and the ledger team keep separate lists of what is outstanding, those lists will disagree.

Intercompany balances that refuse to match

Entities that trade with each other book the same transaction at different times, at different rates, or to different accounts. The seller invoices; the buyer has not received the goods. Both are right on their own books, and the elimination still fails.

The tell is a standing list of unmatched items that gets longer. Another is a plug account at group level that absorbs whatever does not eliminate. Ask how disputes get settled. If the answer is email between controllers, nothing enforces agreement before close.

Reconciliations done to tick a box

A reconciliation should show that the ledger balance traces to subledger detail or an outside statement, and that every difference is understood. Under pressure, it becomes a template where the reconciling item is labelled "timing" and carried forward.

Old reconciling items are the clearest warning. So are reconciliations signed after close, and cash or bank reconciliations where unidentified receipts sit in suspense. Check whether tie points between related accounts, such as receivables and the receivables subledger, are tested or just assumed.

Consolidation and the trial balance

By the time the trial balance is produced, upstream problems have compounded. Eliminations are often entered as a single top level entry with no link to the underlying intercompany detail. Currency translation differences land in an account few people understand.

When the trial balance is rerun several times before it is accepted, upstream inputs were not final. When finance cannot explain movements in equity or translation reserves, the consolidation logic has probably been altered without documentation.

Management adjustments after the books close

Senior adjustments posted after the ledger is locked are sometimes legitimate. They are also where judgement replaces process. Each one should carry a reason and an owner.

Repeated adjustments to the same account period after period suggest a fixable fault sitting upstream. Adjustments made only in a reporting tool, never in the ledger, mean the published numbers and the books have parted ways.

Questions to ask the people who run it

Written procedures describe the intended process. These questions surface the real one.

• Which spreadsheets would stop the close if they disappeared tomorrow?
• What do you fix by hand every month that should come through automatically?
• Which journals do you post that are not on the close checklist?
• When an intercompany balance does not match, who decides which side is wrong?
• Which reconciling items have you inherited from a predecessor?
• What do you wait on from other teams, and what happens when it is late?
• Are there accounts you avoid because nobody knows what belongs in them?
• Which adjustments get made after the ledger is locked, and who asks for them?
• If an auditor picked any balance, which ones would worry you?

The answers usually point to a short set of manual workarounds holding the close together. Those are the places to redesign first, and the places most likely to break if changed without the people who maintain them.

APQC's Process Classification Framework® (PCF) is an open standard developed by APQC, a nonprofit that promotes benchmarking and best practices worldwide. To download the full PCF or to view definitions and measures, please visit www.apqc.org/pcf.